Paraguay President Faces Impeachment Bid as Bank Linked to Him Collapses, Leaving Millions Unable to Access Their Money

Paraguayan President Santiago Peña is facing an impeachment bid after the collapse of Ueno Bank triggered a financial and political crisis, leaving three million customers unable to access their money and raising serious questions about the government's connections to the failed institution.

Thirty-five opposition lawmakers submitted impeachment articles against Peña on 4th November, accusing him of conflicts of interest, misuse of pension funds, and alleged cover-ups surrounding the bank's collapse. They also requested an extraordinary congressional session to debate the motion.

The crisis has intensified scrutiny of Peña's previous business relationship with Grupo Vázquez, the company that controls Ueno. The president held shares in the group until March 2025, despite having taken office in August 2023.

The controversy also centres on Carlos Carvallo, who led Ueno's predecessor financial institution before becoming president of Paraguay's central bank in 2023. Carvallo resigned on Tuesday at Peña's request as criticism mounted over the regulator's supervision of the lender.

Opposition lawmakers have questioned whether the connections between Peña, Carvallo, and the bank compromised regulatory oversight.

Millions Locked Out as Public Anger Grows

Ueno serves roughly 60% of Paraguay's adult population, and manages $800 million to $850 million in public money, including $380 million invested by Paraguay's state pension and health fund.

Its sudden takeover by Paraguay's central bank left depositors unable to access their accounts. Several customers reportedly gathered outside closed branches as they could not withdraw their savings or make essential payments.

The central bank initiated resolution proceedings against Ueno on 2nd November after adjustments to its financial statements revealed that its solvency ratio had fallen below half the legally required minimum.

The regulator had previously raised concerns about lending to companies connected to Grupo Vázquez, including questions about related-party exposures and lending limits. The bank's rapid expansion and substantial exposure to public-sector deposits also attracted scrutiny.

Recently, Ueno announced plans to raise $100 million in fresh capital, but Fitch Ratings changed its outlook on the bank to negative last month, citing rapid balance sheet growth and a high level of intangible assets.

The collapse prompted prosecutors to order the arrest of eight executives and directors over suspected financial irregularities. The investigation has subsequently widened, with prosecutors reportedly bringing charges against 27 people. The allegations remain subject to investigation.

What Happens to Depositors' Money?

Under Paraguay's existing deposit guarantee scheme, individual and corporate depositors are entitled to protection of up to 75 monthly minimum wages per person, equivalent to 228.3 million guaraníes (approximately $38,000) per financial institution.

The central bank's intervention involves appointing administrators to assess Ueno's financial position, preserve its assets, and determine how deposits and liabilities can be handled under the law. Possible mechanisms include transferring deposits and selected assets to another solvent institution or paying eligible depositors directly through the Deposit Guarantee Fund.

In an emergency response, Paraguay's Congress also floated legislation allowing an advance payment of up to 40 monthly minimum wages per depositor, with payments to begin within 24 hours and be completed within five business days of the law taking effect. The proposal was sent to the executive branch after both chambers approved it on 4th November.

With millions of customers affected, public pension funds exposed, and senior officials facing questions over their relationships with the lender, Peña is confronting one of the most serious political challenges of his presidency.